By MARCEL PORCHERON 18/06/2009
This new fund launch is run by Jon Asante, joint Deputy Head of Emerging Markets, who has experience in Latin American markets. Asante is the lead fund manager on First State’s emerging market portfolios, and he will be able to draw on the assistance of Alan Nesbit (the other Joint Deputy Head of Emerging Markets) who is a Latin American specialist. First State’s substantial emerging markets team is heavily involved with stock selection in Latin America, with a number of the stocks in this fund also appear in the firm’s Global Emerging Markets funds. In 2007/2008 the team did almost 300 Latin American company meetings.
This multicap long only fund offers core exposure to the region through a concentrated portfolio of equities. Although it is generally diversified by sector, it will be heavily invested in Brazil and Mexico, the deepest and broadest markets in Latin America. The manager’s style favours attractively valued shares in companies that are expected to grow over the long term and the First State team generally finds most investment opportunities in the mid and small caps. As a result the fund is expected to remain clearly differentiated from the benchmark which is dominated by some very large companies. This diversified portfolio is made up from high conviction stock ideas with a focus on quality companies.
The fund’s performance characteristics are expected to be similar to First State’s other emerging market portfolios, in that the team’s focus on valuation, high quality companies and trying to mitigate risk of loss from poor stock selection should lead to better performance in falling markets. Over the long term the investment process is proven to add value in emerging markets. However, this same discipline has historically led to underperformance in strongly rising momentum markets, or in markets where very large cyclical companies, which are perceived to be lower quality businesses by First State, have outperformed strongly. Until recently this was the case in Latin America. However, First State believe that the region’s markets will become more diversified in future as small and mid sized companies outside the resources sector will grow to represent more of Latin America’s market capitalisation.
Awarded 3 stars